Correlation Between Alphanam and Petrolimex Information

Can any of the company-specific risk be diversified away by investing in both Alphanam and Petrolimex Information at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Alphanam and Petrolimex Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alphanam ME and Petrolimex Information Technology, you can compare the effects of market volatilities on Alphanam and Petrolimex Information and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Alphanam with a short position of Petrolimex Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphanam and Petrolimex Information.

Diversification Opportunities for Alphanam and Petrolimex Information

0.85

Correlation Coefficient

Alphanam  Petrolimex Information

Very poor diversification

The 3 months correlation between Alphanam and Petrolimex is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alphanam ME and Petrolimex Information Technol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex Information and Alphanam is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Alphanam ME are associated (or correlated) with Petrolimex Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex Information has no effect on the direction of Alphanam i.e., Alphanam and Petrolimex Information go up and down completely randomly.

Pair Corralation between Alphanam and Petrolimex Information

Assuming the 90 days trading horizon Alphanam ME is expected to under-perform the Petrolimex Information. But the stock apears to be less risky and, when comparing its historical volatility, Alphanam ME is 1.03 times less risky than Petrolimex Information. The stock trades about -0.21 of its potential returns per unit of risk. The Petrolimex Information Technology is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,890,000  in Petrolimex Information Technology on September 16, 2024 and sell it today you would lose (270,000) from holding Petrolimex Information Technology or give up 9.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	74.47%
Values	Daily Returns

Alphanam ME  vs.  Petrolimex Information Technol

Alphanam ME

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alphanam ME has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Petrolimex Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrolimex Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Alphanam and Petrolimex Information

The main advantage of trading using opposite Alphanam and Petrolimex Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphanam position performs unexpectedly, Petrolimex Information can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Petrolimex Information will offset losses from the drop in Petrolimex Information's long position.

The idea behind Alphanam ME and Petrolimex Information Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.